Northern Nevada 2015 – The Economic Renaissance

March 30, 2015

Northern Nevada 2015 – The Economic Renaissance

By Leah Wagner

Chase International

Corporate Relations Manager

March 27, 2015

Reno’s economic past conjures up images of smoke filled casinos and quickie divorces. While tourism still plays a significant role in the local economy, Reno’s gaming industry is shrinking, while new economic drivers such as warehousing, advanced manufacturing, data centers, technology and media are thriving.

The eyes of the world have been on Northern Nevada since Tesla Motors announced it would build an electric car battery plant here in September 2014. It’s expected to be one of the biggest buildings in the world and, if all goes as planned, Tesla will deliver up to 22,000 jobs, (6500 direct jobs and another 15,500 + indirect jobs created through the multiplier effect) $100 billion in economic impact and a new industry to help power Nevada’s economy.

Soon after Tesla’s arrival in Northern Nevada, Solar City, with Elon Musk at the helm as chairman, announced on February 17, 2015 it is expanding its operations to Northern Nevada.

“Much of the conversation around Tesla has understandably centered on electric cars, but Tesla’s ambitions are much greater than that. In partnership with SolarCity, the company has set its sights on a network of solar energy generation and storage that could mean sweeping changes to the energy industry. Tesla is developing battery technology that it hopes will become the centerpiece of both vehicle power and home energy across the nation.

As a Morgan Stanley analyst told Bloomberg recently, “We believe there is not sufficient appreciation of the magnitude of energy storage cost reduction that Tesla has already achieved, nor of the further cost-reduction magnitude that Tesla might be able to achieve once the company has constructed its ‘gigafactory.’”

If Tesla’s battery technology becomes a supplement or alternative to nation’s electricity grid, as well as the dominate power source for electric vehicles, Northern Nevada’s gigafactory projections may have underestimated the long-term economic impact to the region.”

At a meeting hosted by Nevada Business Connections on March 18, 2015, Dean Haymore, Storey County Buildings and Planning Administrator further expanded on Tesla’s and SolarCity’s wide ranging technological and economic impact.

Mr. Haymore discussed the growth and evolution of the battery industry that is igniting a gold rush of high tech companies desiring to be located in proximity to the Tesla, Panasonic and SolarCity projects in Northern Nevada.

In three years, Tesla projects that battery technology advances will increase their vehicles’ range to 400 miles on a single charge. Tesla further projects that efficiencies in manufacturing will produce significant price reductions, greatly expanding applications for their batteries. Specifically, in 10 – 15 years, Tesla and Solar City plan to install their batteries in every home connected to solar panels on every home’s roof, and take every home off the grid.

Mr. Haymore announced that early in March 2015, Lance Gilman, Storey County Commissioner and exclusive land broker at the Tahoe Reno Industrial Center (TRIC) sold 2000 acres to a high tech company, and another 1200 acres to another high tech company. All land in TRIC near the Tesla factory is now sold out. The companies located next to the Tesla factory will be server farms and high tech manufacturing, and have relocated from around the world for the strategic advantage of being near Tesla, Panasonic and Solar City.

Gov. Brian Sandoval stated the Tesla deal “changed the trajectory of Nevada forever” and that he envisions Northern Nevada as the “Cradle of Innovation”.

Reno has been nicknamed “The Eastern Suburb of Silicon Valley” and the “Heartbeat of the Tech Industry.”

Reno is living up to these new names with a series of sonic booms after the Tesla deal.

Just one month after the Tesla announcement, Northern Nevada became home to another electric car manufacturer, Cenntro Motors.

http://cenntromotors.com/company.html

In January 2015, Switch announced plans to construct a $1 billion data center to be located at the Tahoe Reno Industrial Center.

Switch’s Northern Nevada operations include a 3 million square foot facility – the same size as Tesla’s GigaFactory on a 1000 acre parcel. This center will store

data for the US Government & fortune 500 companies like Ebay & Amazon, and create 5000 jobs – mostly highly skilled, many in the 6 figure salary range.

As impactful as Switch’s data center is to the Reno economy, what portends inestimable economic growth to the region is Switch’s construction of the “Super Loop.”

The “Super Loop”, a 500 mile fiber line connecting Northern and Southern Nevada with Northern and Southern California will make Nevada the most digitally connected State in the US.

For high tech companies that depend on the fastest and highest capacity data transmission, economic development experts predict Reno with its unrivaled tax advantages and strategic geographic location will become the gravitational center of the tech industry. (In a private lunch with EDAWN VP Stan Thomas, Stan stated that EDAWN is in discussions with many high tech companies interested in Northern Nevada because of the Super Loop.)

On March 12, 2015, Koch Industries announced the opening of an IT Applications Center in Reno. The Reno location will primarily serve as a satellite office focused on providing Koch Industries IT capabilities in the areas of Applications (Development, Analytics, Support, Databases, etc.), Cyber-Security, Global Networks (Architecture, WAN, LAN, Voice, etc.), and Computer Platforms (Cloud, Virtual, Converged). The new facility will also serve as an innovation and creative space for meetings with strategic vendors and will allow the company to host discussions and brainstorming pertinent technology in support of the Northern Nevada IT community.

“The selection of Reno as the location for the satellite Applications Center of Koch Business Solutions is an incredible validation of the growth of IT in the region,” said, Mike Kazmierski, CEO of EDAWN. “Koch is number two on Forbes’ list of America’s largest private companies, so to be selected by a company of this caliber just reinforces the latest success in the region following recent announcements by Switch, Tesla, Apple and others.”

Here are some other heavy hitters in the tech industry that have already chosen Reno as their new home:

Apple

Dell

Clear Capital

Ghost Systems

Further proof that Reno is the “Heartbeat of the Tech Industry”

Popular Mechanics recently named Reno one of the “Top Start Up Companies in the US”, and Reno was selected to Host NEXT City in 2015. In February 2015, the Economic Development Authority of Western Nevada (EDAWN) was the winner of the Innovation Ecosystem Award at the Global Innovation Summit. On March 5, 2015, The University of Nevada Reno hosted the Brooking Institution at an event where plans for an “Innovation District” were unveiled.

“The national non-profit media organization Next City will host its sixth annual Vanguard conference in Reno, NV. Vanguard is an annual experiential urban leadership gathering of 40 of the best and brightest urban leaders under 40.

The 2015 Vanguard will be the first held west of the Mississippi River. It’s fitting that Next City selected Reno – a growing city now experiencing a surge of new cultural and entrepreneurial activity – as our first West Coast partner. The city’s gaming industry is shrinking while new economic drivers such as advanced manufacturing, technology and media are thriving, bringing fresh creative energy to the city’s downtown. A three-hour drive from San Francisco and home to a research university, Reno is well-positioned for expansion of its tech industry”

“The Global Innovation Summit (GIS), held in Silicon Valley (February 17th-19th, 2015), gathered over 550 “new economy builders” from over 50 countries who met to discuss building innovation ecosystems; how to catalyze innovation across companies, cities, and countries sustainably; and how to accelerate entrepreneurship, technology, and impact at scale. The Global Innovation Summit recognizes the world’s leading companies, organizations, and communities that exemplify the broadest spirit of innovation, by transforming the systems around them. EDAWN was selected as one of this year’s ecosystem award winners for the combined success of attraction, retention, and entrepreneurial development efforts which are helping transform Northern Nevada’s economy.”

Amazing Stats on Northern Nevada as it Leads the US in Economic Recovery

Nevada’s economy is the 3rd fastest growing in the nation as indexed by job creation, behind Texas in second place, and North Dakota in first. Economists predict Nevada will be #1 in job creation by the end of 2015, as Texas’ and North Dakota’s job growth is based in oil production, which is predicted to decline with falling gas prices. Unlike the volatile nature of the oil industry, Nevada’s robust economic growth is grounded in diverse and relatively stable industries such as logistics, distribution, manufacturing and high tech. (Stats presented at “Directions 2015” economic forecast event 2-5-2015)

In 2014, EDAWN created 4179 jobs compared to less than 1000/ year in 2008 – 2011. (these and the following stats were presented at the EDAWN Economic Update 1-22-2015)

Unemployment in Northern Nevada fell 54% from 2011 @ 14.2% to 6.4% current. Projected to be close to 4% soon – “Virtual unemployment”

EDAWN conservatively projects a 5% unprecedented explosive growth rate for the next five years.

Another source confirming the economic growth in Northern Nevada – at a meeting on 1-26-2015 at Reno City Hall – a manager from the City of Reno Permit office stated that building permits are up 20% from last year.

Why Reno is Emerging as the Economic Hot Spot of the West

Combine the elements of the world’s largest industrial park with natural advantages in geology and logistics and inject the catalysts of the most lenient tax and regulatory systems in the nation and the result is the unparalleled economic ecosystem of Northern Nevada. Add the ethereal beauty of Lake Tahoe and the surrounding Truckee Meadows, top executives choose Reno not just for the balance sheet but for work/life balance.

For an excellent, more detailed description, see EDAWN’s booklet, Why Nevada:

“What appears to be in the middle of nowhere is one of the major crossroads of the American West” – Gary Koy, manager of the California Trail Interpretive Center

Reno is located at the intersection of two of the largest transcontinental highway systems in North America. US 395, connecting Canada to Mexico and I-80, which connects San Francisco to New York, converge in the center of Reno. Fortune 500 companies such as Amazon, Wal-Mart and Barnes & Noble picked Northern Nevada so their trucks could reach every major market in the West with economical one-day ground shipping.

Reno is proximate to numerous natural mineral resources and is also on a major rail line, efficiently connecting the products from Nevada’s mining industry to the US’s major marketplaces.

Tax Structure

Nevada has the lowest state income tax burden nationally, and is ranked third for business climate, which includes income, sales, and property taxes as well as unemployment insurance taxes.

Nevada has:

No corporate, personal, inventory or unitary tax; no impact fees

No estate, inheritance and/or gift taxes

No franchise tax

No Special Intangible tax

Lowest property taxes in the region

Foreign Trade Zone provides tax savings for qualifying companies

for more detailed information on the Nevada Tax advantage, see:

http://www.edawn.org/why-reno/incentives

Pro- Business Government Regulatory Environment

Elon Musk, Tesla Motors CEO, said Nevada didn’t give the biggest incentive package when it came to the deal to land the gigafactory.

“This is not just about the incentives,” he said. “Nevada is a “really get things done state. That was a really important part of the decision.” ​

“I’m the first one to tell you I don’t like government. I don’t like taxes. I don’t like bureaucracy. We run as a business.”

Craig King, CHASE’s COO and I had the unique opportunity to have lunch on the day of the Tesla Announcement in September 2014 with Lance Gilman, Storey County Commissioner and exclusive land broker to TRIC.

Lance regaled us with stories of the Tesla deal. Tesla asked Lance what the time frame was for obtaining permits in TRIC. Lance pulled a permit out of his briefcase and said, “Here is your permit. I have a shovel in the back of my truck. Let’s go break ground right now.” The Tesla execs were astounded. Many factors went into the Tesla deal, but Nevada’s lightning fast, lack of red tape permit process catapulted Nevada ahead of the competition.

Nevada is a Right-to-Work State.

Right-to-Work Law secures the right of employees to decide for themselves whether or not to join or financially support a union.

Policy on Union Membership, Organization, etc.:

No person shall be denied the opportunity to obtain or retain employment because of non- membership in a labor organization.

Prohibited Activity: Agreements prohibiting employment because of non-membership in labor organization; strike or picketing to force or induce employer to make agreement; compelling person to join labor organization, strike, or leave employment; conspiracy to cause discharge or denial of employment or to induce refusal of work on basis of membership

Of all of the planets aligning to make Northern Nevada one of the most vibrant economic ecosystems in the US, Tahoe Reno Industrial Center wields gravitational pull the size of Jupiter. Understanding the economic singularity and colossus that is TRIC is key to understanding the Northern Nevada Economy.

Home to heavy hitters like Apple, Telsa, Switch, Pet Smart, E-Bay, & Walmart , TRIC is located nine miles east of Reno in neighboring Storey County. Spanning a massive 107,000 acres, and covering more ground than the city of Las Vegas , TRIC is the largest industrial center in the world. While all of Northern Nevada basks in the economic advantages of geologic, geographic, logistical, tax and regulatory infrastructure, Storey County and TRIC hyper – concentrates these features in a master planned industrial center like no other in the United States.

Permanently and entirely zoned as “I-2 Heavy Industrial”, TRIC allows almost any type of use without the need for special or conditional use permits. Unlike virtually every other jurisdiction in the United States, permanent I-2 zoning insulates TRIC against the variances of election cycles and the composition of governing bodies that may or may not consider special use permits.

From TRIC’s website:

“The scheduling risk is almost nonexistent,” said Lance Gilman, the industrial center’s principal and director. “The regulatory environment is zilch.” For a company coming in, they’ve got building permits in 30 days or less . . . That’s the value of deregulating your community.”

At first glance, it may seem to be the Wild West of building permits — no bureaucratic hoops to navigate; no extended waiting times for inspectors; no delay for blueprints to be examined. The contractor can be moving dirt on a site and the concrete slab can be poured within days of an application.

The county’s ability to make good on its promise of lightning fast permits is a tremendous selling point, helping to attract big-name companies to a state that is somewhat limited in its ability to compete in the tax incentive battle.

“In other places, they may have 20 to 30 permits to pull or agencies to get approval from,” said Mike Kazmierski, president of the Economic Development Authority of Western Nevada. “Any one of which could stop the process.”

Many industries are making TRIC their home base, a direct result of TRIC’S deregulated environment.

As the economic climate of Northern Nevada projects significant (most likely explosive) growth in diversified high tech industries with predominately high wage jobs, the real estate market in Reno is projected to expand significantly as well.